Are we in an AI bubble?
For the last few weeks, fueled by the weak launch of GPT-5, speculation has risen that we might be in an “AI bubble” that is about to burst. Are we?
I’m not a financial expert that can really pull this apart, but I see three ways to look at this.
There are well over 150 AI-related startups that are worth over $1B
That seems untenable. Some will survive and some will fail, and that list seems likely to consolidate a lot in the coming months and years.
Most AI firms are losing money
Companies like Cursor (an AI coding app valued at $9.9B) are currently losing money every month because of the expensive API fees they’re paying to companies like OpenAI. However, even at these “high” API prices, companies like OpenAI are losing money every month as well.
These are two of the darlings of the AI world right now, and even they are losing money? Something’s gotta give. Granted, prices will continue to come down as technology improves, but this feels very problematic.
This will likely end up like the dot-com bubble burst of 2000
In March, 2000, the dot-com bubble burst and many companies went out of business. However, the internet clearly didn’t go away; only the weak companies did.
I see the same thing here. Even if the AI bubble bursts, AI isn’t going anywhere. Some companies will vanish and others will morph, but AI is undoubtedly here to stay.
What do you think? Is this a bubble that’s about to burst, or are things going to keep climbing?